Construction Payroll: Why a Specialized Solution Matters

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Construction Payroll: Why a Specialized Solution Matters

Construction companies have a lot of options for payroll. They can handle it in-house, buy an off-the-shelf software package, or contract with a payroll provider like BenefitMall. Within the field of providers there are also multiple choices. Some companies only offer generic solutions while others have industry-specific solutions that cater to the construction industry.

For the record, BenefitMall is one of those companies with a specialized solution. They say that a payroll solution built specifically to meet the needs of construction companies matters for a whole host of reasons. Some of those reasons are listed below.

Dealing with Contractors

There are a lot of things that make running a construction company unique. Among them is a heavy reliance on contractors and subcontractors. Using so many people who are not classified as regular employees can create nightmares for the payroll department.

Your average construction company hires both standard employees and contractors. Both groups are treated differently for payroll purposes. As just one example, consider withholding income tax and FICA contributions. Employees and contractors alike pay both, but how they pay is different.

The employer withholds income tax and FICA contributions from employee paychecks. He/she doesn’t withhold them from contractor paychecks. It is up to contractors to pay their own income tax and FICA.

Differing Pay Rates

Next up are differing pay rates that are common to the construction industry. Pay rates can vary not only by trade, but also based on the difficulty of the work, the volume of the work a contractor provides, how quickly the work needs to be done, and so forth. The challenge with different pay rates is keeping everything straight so that every contractor gets paid exactly what he or she is due.

Overtime and Bonus Pay

Construction companies are required to pay overtime to every standard, non-exempt employee who works in excess of 40 hours during a single work week. Contractors are not eligible for overtime pay because they are not employees. So if overtime is involved on any given job, payroll has to distinguish between employees and contractors.

When it comes to offering bonus pay, the goal is to structure it in such a way as maintain compliance but limit tax liabilities. Once again, there are different ways to give bonus pay to both employees and contractors. They have to be kept separate within the payroll system.

Worker’s Comp and Benefits

Last but not least is the complicated issue of administering worker’s comp insurance and any employee benefits a company decides to offer. Neither one applies to contractors inasmuch as they are self-employed. They take care of their own worker’s comp and benefits.

As for employees, they need to be covered. Construction company owners need creative solutions that allow them to provide worker’s comp and additional benefits at a price they can afford. Payroll providers like BenefitMall frequently have arrangements with third parties that offer very creative packages.

A generic, off-the-shelf payroll solution may work well for an auto repair shop or a consulting business. It generally does not work well for the construction industry. There are too many variables in the construction business to account for with generic software. That is why a solution built specifically for construction companies is so important.

If you own a construction company that has been struggling to keep up with payroll as of late, it might be time for you to try something new. Your best bet is to look for a solution that is intended specifically for your industry. A specialized solution will streamline your payroll, make your life easier, and ensure compliance.

Eli Pappas

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